By Harry Robertson
LONDON (Reuters) – The dollar was largely steady on Monday as investors waited for further clues to chart the U.S. yield path in the wake of cautious comments from Federal Reserve officials, even as inflation shows signs of cooling.
The euro was little changed at $1.0871, not far from a nearly two-month high of $1.0895 it reached last week. So far in May, yields have risen 2%, boosted by a decline in the dollar due to weaker U.S. growth and inflation data and a recovery in the eurozone economy.
Data last week showed U.S. consumer prices rose less than expected in April, leading markets to price in 50 basis points of Fed rate cuts this year. Still, several Fed officials subsequently issued words of caution about when rates could fall, sending market prices just below the 50 basis point mark.
The , which tracks the currency against six major peers, was last very slightly higher on Monday at 104.49. Interest rates have fallen by about 2% since reaching a more than five-month high in April.
Neil Jones, who works in financial institutions FX sales at currency services firm TJM FX, said a “barrage” of speeches from Fed officials will keep investors on their toes this week.
“When market trends are moving quite firmly in one direction or the other (on rate cuts), then the tendency is for Fed speakers to be somewhat contrarian in their commentary,” he said.
Four Fed speakers, including Atlanta Fed President Raphael Bostic, will speak Monday. Markets will also focus on the minutes of the latest Fed meeting taking place on Wednesday. Survey-based indicators of the economy for the eurozone, Germany, Britain and the US will also be released this week, alongside more speeches from central banks.
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Elsewhere, the pound hit a two-month high of $1.2711 and was last just below that level ahead of Britain’s inflation report due on Wednesday.
The Japanese yen was flat at 155.73 per dollar, with traders on alert for signs of government intervention. The currency has moved within tight ranges in recent trading days after a tumultuous start to May in the wake of suspected currency interventions by Tokyo to support the yen.
Jones also said he expects the rally in gold to support the currencies of commodity-exporting countries such as Australia in the coming months.
The Australian dollar was flat at $0.669 on Monday, but has risen 3.4% this month, partly because Australian inflation has remained stubbornly high.
Tight supply, persistent global demand and the heavy deployment of speculators have caused copper prices to rise dramatically in recent weeks.
Oil prices were slightly higher on Monday after a helicopter crash killed Iran’s president while Saudi Arabia’s king faces health problems, raising the prospect of more instability in the Middle East.
